ASIC has issued updated guidance on the obligations of auditors of companies and registered schemes to report contraventions of the Corporations Act 2001 (Cth) (and similar obligations under other legislation) and has introduced new guidance for auditors of credit licensee trust accounts. Auditors should familiarise themselves with the new guidance (which also includes more examples of when a contravention will be ‘significant’) to ensure that they do not expose themselves to potential cancellation or suspension of their registration, or criminal penalties, for failure to report.
ASIC has released an updated version of Regulatory Guide 34 Auditor’s obligations: Reporting to ASIC (RG 34). The updated RG 34 continues to provide guidance on:
- the obligations of auditors of companies and registered schemes under sections 311 and 601HG of the Corporations Act 2001 (Cth) (Act) to report contraventions and suspected contraventions of the Act;
- the specific reporting obligations in respect of AFS licensees under section 990K of the Act; and
- similar reporting obligations in respect of credit licensees under section 104 of the National Consumer Credit Protection Act 2009 (Cth),
and introduces new guidance for reporting by auditors of credit licensee trust accounts.
Importantly, the updated RG 34 provides additional examples of circumstances that may and may not be ‘significant’ (having regard to the penalty, the effect on the company or scheme’s financial position, the effect on the information available about the company’s or scheme’s financial position, and any other relevant matters), and thus trigger the reporting requirements under sections 311 and 601HG of the Act. The examples of contraventions that are likely to be reportable to ASIC given in RG 34 relate to:
- insolvent trading;
- non-compliance with accounting standards;
- modified audit or review reports;
- employee or officer fraud;
- contraventions relating to related party transactions and board composition;
- non-compliance with obligations to keep books and records;
- non-lodgement of reports; and
- ongoing non-compliance with compliance plans.
See also ASIC’s media release dated 31 May 2013.